The Russia bank run crisis is accelerating, with Russians pulling billions from lenders in fear that the Kremlin will freeze or seize their savings to fund the war in Ukraine.
In the first half of August alone, depositors withdrew $3.4 billion (286.4 billion roubles), according to central bank data cited by the Washington Post. That follows $7.3 billion withdrawn in July and $4.5 billion in June.
If the full-year pace holds, withdrawals will nearly double the $24.7 billion recorded in 2022, when Vladimir Putin launched his invasion of Ukraine.
Gazprombank among the hardest hit in Russia bank run crisis
The damage is not spread evenly across the sector. Euronews reports that Gazprombank lost 299.5 billion roubles (€3.04bn), equal to 10.8% of its total deposits, over four months, making it the most affected lender so far.
The flight of cash has created a liquidity crunch that is threatening Russia’s ability to fund its war. Taras Skvortsov, a senior executive at top retail lender Sberbank, told Russian radio that many banks lack the cash on hand to buy government bonds.
According to Meduza, Skvortsov, in his capacity as Sber’s chief financial officer, has projected that the increase in cash in circulation could reach 3.8 trillion roubles by the end of 2026 as Russians keep money at home rather than in accounts.
The finance ministry halted government bond auctions indefinitely last month, citing higher borrowing costs and weak demand. Those auctions are the Kremlin’s primary tool for domestic borrowing to cover a budget deficit that hit $76 billion at the end of July.
Kremlin eyes pensions and private assets to plug the gap
With its main borrowing channels closed, Moscow is looking elsewhere. The finance ministry is preparing legislation that could give it access to $40 billion in pension savings held in privately managed funds.
The leader of Russia’s Communist Party has already told parliament that 130 trillion roubles sitting in bank accounts should be “mobilised” to address the country’s budget woes. Russian oligarchs have already felt the pinch: $51.5 billion in assets were seized for the state last year.
“If the government needs cash, Putin will just do a grab for assets. He doesn’t care,” an associate of a Russian billionaire told the Washington Post. “And that’s where I think it’s heading.”
A former finance official told the Post the psychology driving the bank run crisis is straightforward. “Drones are flying. Things are burning down. Nervousness is growing. And people’s everyday wisdom may be kicking in that they need to have cash under their pillow and not somewhere in banks where it may never be returned,” the official said, adding that banks have much of their capital tied up in loans elsewhere.
Warnings had been mounting for some time. A state-backed Russian think tank, the Centre for Macroeconomic Analysis and Short-Term Forecasting, said in December that the country could face a banking crisis by October if loan troubles worsen and depositors keep pulling funds. In May, sources told the Russian newspaper Izvestia that nearly 25% of the bond market is now at risk of default as businesses that borrowed at low rates must refinance at far higher ones.
A European intelligence report published in June said Russian lenders are vulnerable due to soaring indebtedness and deteriorating loans. The number of Russians who declared bankruptcy last year jumped by almost a third to more than 500,000, the report said, according to Reuters.
The financial strain mirrors pressure on the battlefield. Sources told the Wall Street Journal that Russia’s military is preparing plans for a wider mobilisation, though the Kremlin may wait until after parliamentary elections before making any announcement, wary of a repeat of the mass exodus that followed the September 2022 call-up. Property prices in Georgia and Armenia have already risen in anticipation of another wave of departures, real estate agents told the Journal.
